- For the nest egg to supply ample income to pay for the lifestyle agenda planned by the retiree;
- For the nest egg to contain a growth component to maintain and limit principal depletion until the retiree’s demise, and possibly beyond, so that funds can be left to a surviving spouse or heirs.
Founded by investing legend John Bogle, “the father of index investing”, Vanguard has become the second largest asset manager in the financial industry after BlackRock. The company offers a wide range of mutual funds and exchange traded funds (ETF) that cover a panoply of investor needs. Those seeking to modify their retirement portfolio with an eye towards a growth and income combination might wish to look at these Vanguard ETFs:
- Vanguard Value Index Fund ETF (NYSE: VTV)
- Vanguard Total Stock Market ETF (NYSE: VTI | VTI Price Prediction)
- Vanguard Real Estate Index Fund ETF (NYSE: VNQ)
Vanguard Value Index Fund ETF (NYSE: VTV)
Vanguard’s Value Index Fund ETF invests in stocks whose fundamental financials calculate to be worth more than their market price.
Value stocks, by definition, are undervalued in the market. As a result, the underlying fundamental financials and business of the company calculate out to indicate that the stock is underpriced. Sometimes this can be due to a negative news article that impacts a rival of the company or that stock’s entire industrial sector. Other times, it could be a large institutional investor selling shares to create liquidity for its other plans that create a temporary price depression. Whatever the reason, VTV seeks to capitalize on these opportunities, and it has an impressive track record.
VTV tracks the CRSP Large Value Index as its benchmark. It has $131.5 billion AUM, and a fairly low 0.04% expense ratio. It launched in January, 2004. Its annual dividend yield is 2.39%.
VTV’s top 10 holdings (as of the time of this writing) out of 335 stocks are:
- Berkshire Hathaway Inc. Class B – 3.15%
- JPMorgan Chase & Co.- 2.92%
- UnitedHealth Group Incorporated – 2.41%
- Exxon Mobil Corporation – 2.40%
- Broadcom Inc. – 1.82%
- Home Depot, Inc. – 1.81%
- Procter & Gamble Company – 1.79%
- Johnson & Johnson – 1.78%
- Walmart Inc. – 1.67%
- AbbVie, Inc. – 1.66%
The top 5 industrial sectors for VTV are:
- Finance – 26.35%
- Electronic Technology – 11.68%
- Health Technology – 11.52%
- Consumer Non-Durables – 7.8%
- Retail – 5.62%
Performance-wise, VTV’s returns were:
- 1 Year – 19.34%
- 3 Year – 9.60%
- 5 Year – 10.97%
Vanguard Total Stock Market ETF (NYSE: VTI)
The Vanguard Total Stock Market Index Fund attempts to represent the entire range of US stocks, from large cap to micro cap, through its 3,600 different stock portfolio holdings.
By design, stock indexes are intended to cover a category of stocks and then calculate averages of their various criteria to then quantify that category. The Dow Jones Average covers 30 stocks. The S&P 500 covers 500, and so on. VTI is an ETF whose benchmark is the CRSP US Total Market Index. This is meant to include large cap, microcap, and everything in between, so as to be representative of the entire US corporate stock market.
VTI has $456.8 billion AUM, and a fairly low 0.03% expense ratio. It launched in May, 2001. Its annual dividend yield is 1.37%.
VTI’s top 10 holdings out of 3,608 are:
- Apple Inc. – 5.94%
- NVIDIA Corporation – 5.65%
- Microsoft Corporation – 5.50%
- Amazon.com, Inc. – 3.20%
- Meta Platforms Inc Class A – 2.26%
- Alphabet Inc. Class A – 1.82%
- Alphabet Inc. Class C – 1.49%
- Berkshire Hathaway Inc. Class B – 1.45%
- Broadcom Inc. – 1.44%
- Eli Lilly and Company – 1.29%
The top 5 sectors for VTI are:
- Electronic Technology – 20.52%
- Technology Services – 19.69%
- Finance – 13.54%
- Health Technology – 7.89%
- Retail – 7.83%
Performance-wise, VTI’s returns were:
- 1 Year – 25.42%
- 3 Year – 12.19%
- 5 Year – 14.23%
Vanguard Real Estate Index Fund ETF (NYSE: VNQ)
The Vanguard Real Estate Index Fund is an ETF that generates income through its holdings in 158 various Real Estate Investment Trusts and affiliated real estate stocks.
From an income perspective, real estate and its rent rolls are one of the most consistent and dependable income sources in the financial industry, because, for the most part, they are impervious to interest rate fluctuations. VNQ offers exposure to the real estate sector’s rent roll income without the management and compliance headaches that real estate managers perennially encounter through investments in publicly traded REITs (Real Estate Investment Trusts) and other real estate based companies.
VNQ tracks the MSCI US IMI/Real Estate 25-50 Index as its benchmark. It has $64.7 billion AUM, and a 0.13% expense ratio. It launched in November, 2001. Its annual dividend yield is 3.85%.
VNQ’s top 10 holdings are:
- Vanguard Real Estate II Index – 13.91%
- Prologis, Inc. – 5.83%
- Equinix, Inc.5.18%
- American Tower Corporation – 5.10%
- Welltower Inc. – 4.54%
- Digital Realty Trust, Inc. – 3.46%
- Simon Property Group, Inc. – 3.34%
- Public Storage – 2.81%
- Realty Income Corporation – 2.77%
- CBRE Group, Inc. – 2.40%
Sector Wise, 98.86% of the 158 holdings in VNQ are in the real estate category. 1.07% falls into the communications service sector.
Performance-wise, VNQs returns were:
- 1 Year – 12.13%
- 3 Year – (-1.07%)
- 5 Year – 4.20%
As Vanguard’s catalog of ETFs is very large, VTV, VTI and VNQ represent just one sample combination out of hundreds of variants. For example, Vanguard’s S&P 500 ETF, VOO, is currently the most popular ETF in terms of holders. One might want to combine a higher yielding ETF based on bonds, for example, for the income segment while keeping a VOO for the growth component.
The range of combinations possibilities is huge. The primary objective is to generate the income required for one’s intended retirement lifestyle for as long as needed. Anything beyond that is on a case by case basis, but Vanguard’s offerings certainly have the vehicles to achieve those ancillary objectives.
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